Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, May 3, 1927, Volume 14, Part 2

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357
A meeting of the Federal Reserve Board was held in the office of the
Federal Reserve Board on Tuesday, May 3, 1927, at 11:15 a.m.
PRESENT: Vice Governor Platt
Hamlin
Mr. Miller
Mr. James
Mr. Cunningham
Mr. Eddy,Secretary
Mr. McClelland, Asst. Secretary
The min' utes of the meeting of the Federal Reserve Board held on
APril 27th were read and approved.
natter approved on initials on April 29th, namely, application of
the First National Bank, Big Sandy, Tennessee for stock in the Federal
Reserve Bank of St. Louis (17 shares), effective if and when the
CeMPtroller of the Currency issues a certificate of authority to comIllenee business.
Formally approved.
Letter dated April 28th from the Assistant Secretary of the Federal
Ileserve Bank of New. York, advising that the board of directors at their
rileetillg on that day made no change in the ba.nkls existing schedule of rates

Of dit,count

and purchase.
Noted.

Telegram dated April 28th from the Chairman of the Federal Reserve
hrik. of
Kansas City, advising that the board of directors at their meeting
On that

_
day made no change in the bank's existing schedule of rates of dis-

e°114t and purchase.
Noted.
Report of Executive Committee on memorandum dated May 2nd from the
bire

etor of the Division of Research and Statistics, recommending the




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5/3/27

aPPointmerrt of
Miss Aryness Joy as clerk in the Division for a period of
two months
from July 1st to August 31st, at a salary of $200 a month; the
Cozmittee also recommending approval.
Approved.
The Vice Governor then submitted application of the Bank of Hoquiam,
11°Illiarai Washington, for membership in the Federal Reserve System and for
90

shares of stock in the. Federal Reserve Bank of San Francisco; together

vrith re commendation s of the Board's sub-committee

(1) That prior to ap-

al of the application the bank be required to charge to undivided
P1'
"
Profits
nc)or

;2
,-.500
of the unsecured line amounting to

- Tashington
3.0,000 to the .

and Manufacturing Company (novr in voluntary liquidation) being the

P°rtion estimted by the examiner as a loss and to charge to undivided
Profits an overdraft of the Washington Door and Manufacturing Cempany,
ztra°1-Inting to ,621.82, estimated by the examiner as doubtful; (2) That

these adjustments have been made the application be granted subject
to the nine regular conditions of membership contained in the Board's
RE)Ulation H, and the further cendition that before any dividends are
PEtici
n amount be set aside each year as a reserve fund sufficient to
0111,0

a'a-nate at the expiration of the bank's lease, namely, five years, the

cost of
remodeling its quarters now carried at CA5,898.99; and (3) That
the b
ank be advised that the Board is now considering what changes should
de in the
regular conditions of membership in the light of the pro-

's of the McFadden Act and if any changes in the present conditions
Eq'e p

'°und necessary the bank will be subject to such changes and accept-

°I' the bank of the conditions now being imposed will be deemed to be
e 441,4.
ke'
4 ance

of any changes in those conditions which the Board finds to be




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n
ecessary in view of the amendments contained in the McFadden Act.
Upon motion, it was voted to approve the
application of the Bank of Hoquiam, subject
to the conditions recommended by the subc oranit tee.
Letter dated April 27th from the Assistant Federal Reserve Lgent at
all Francisco, advising that the Pacific Southwest Trust and Savings Bank
On April 23rd established the branch at 6825 South 7Testern Avenue, apProver,
%4

by the Board on February 16th.
Noted.

Letter dated llay 2nd from the Federal Reserve Agent at Boston, advisirlg that the Rhode Island Hospital Trust Company of Providence on ',Say 2nd
°Perked- the branch at the corner of Tteybosset and Empire Streets, Providence,
aPProved by the Board on April 1st.
Noted.
Memorandum from Counsel dated April 26th with reference to the Clayton
4ct aPPlica.tion of Mr. Bruce F. Failey, involving the Terre Haute National
134111z and the United States Trust Company, both of Terre Haute, Indiana;
e°L111601 suggesting that no definite action be taken on the application but
that a reasonable time be allowed for the completion of arrangements now
‘Iricler way for the consolidation of the two institutions involved.
Upon motion, Counsel's recommendation and
a proposed letter to the Federal Reserve Agent
at Chicago advising accordingly were approved.
Meznorand= from Counsel dated April 26th with reference to the apation of 1.1r. Victor S. Fisher for permission to serve at the same time
Eta
'Lee President and director of the Pacific Avenue National Bank, and as
or of the Atlantic Safe Deposit and Trust Company, both of Atlantic




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-4-

City, N.J.,
which on September 29, 1926, was temporarily refused by the
board

with an opportunity to the applicant to present additional informs.-

in support of his application; Counsel stating that the evidence subInitted by
the applicant is not sufficient to show that the two banks in"I'ved are not in substantial competition and recommending, therefore, that
the aPPlication be definitely refused.
Upon motion, Counsel's recommendation was
adopted.
Letter dated April 25th from 1.1r. F. E. Scobey accepting appointment
by
the Board as a director of the San Antonio branch of the Federal Reserve
?allk

of
Noted.
Letter dated April 26th from Mr. Reagan Houston accepting appointment

.843 4

director of the San Antonio branch of the Federal Reserve Bank of

1°41148.
Noted.
Letter dated April 27th from the Federal Reserve Agent at Boston,
rec°11.ae nding the designation as an examiner without change in salary of
James D.
macDonald, now an assistant examiner, and the designation as
4e8istant examiner without change in salary of ilr. Joseph J• Holland, now
elerk in the Collection Department of the Federal Reserve Bank of Boston.
Approved.
RePort of Executive Cc:mit-tee on memorandum dated April 29th from the
Colkatreiler of the Currency, recommending approval of an application of
the ?iret National Bank of Kennebec, S. D., for permission to reduce its
NiLpit
al from .'$
L, 50,000 to 25,000, and stating it is proposed to rearrange




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-j-

the stoc_
ovrnership of the bank, using the released capital and approxilaatelyJ.
‘,14,000 of ne,r ;Ione:, to be paid in

y two new stockholders, to re-

111°.7e losses and certain other assets aggregating approximately
Et11d to
establish a surplus fund of

36,000,

2500, thus leaving the bank -rith a

caPitai of)25,000
and a surplus of :,;2500; the Comittee also reconaending
PProvai.
Approved.
Report of Couuittee on Examinations on letter dated April 28th from
the
Assistant Federal Reserve Agent at New York, transmitting and recom34ending a,)proval of an application of the Fidelity Union Trust Company,
hyrarizi Ii•J•, for permission to establish six branches in Newark at the
1c)cations of e:d.sting banks 17hich are to be taken over; the Cormittee
Etlso

recomi lending approval.
Noted with approval.
Report of Committee on L.yaminations on letter dated April 30th from

the?ederal Reserve Agent at St. Louis, transmitting and recommendirg apal of an application of the First National Bank, '':eraphiz, Tennessee,
tor
4— mission under Section 13 of the Federal Reserve Act to accept
tlrafts and
bills of exchange up to 100"/',; of its capital and surplus; the
e°111Mittee

recoramending approwl and pointing out that the application was

riled at the request of the Board following the consolidation vrith the
First Rational Bank of the Central - State National Bank or :emphis to which
th° L'oard
on October 22, 1918 had granted authority to accept up to 100:g.
Approved.
ilemorendum. from the Secretary dated April 27th, advising that he
'secl with the Chairman of the board of directors of the Federal



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neserve Bank of Atlanta the question of whether or not the directors of
the A
tlanta- bank would want to employ Lir. A. B. Trowbridge as Consulting
Architect in connection
with the installation of a vault at the Cuban
/
1
4erleY) tind that the Chairman expressed the opinion that Mr. Trowbridge's
eqloyment would not be necessary so far as the bank was concerned, but
stateu•
that if the Board desired to employ Mr. Trowbridge to go over the
8Pee4fications there would be no objection on the part of the Atlanta bank
to PaYing a portion of his fee.
After discussion, the Secretary was instructed
to communicate with Mr. Trovrbridge and ascertain
vrhat his fee would be if employed by the Board
merely for the purpose of inspecting plans and specifications covering the installation of the vault at
the Cuban Agency after their preparation and submission by the Federal Reserve Bank of Atlanta.
Letter dated April 27th from the Federal Reserve Agent at Chicago,
trarietaitting written notice of intention to withdraw from the Federal
413erve System, filed with him on that date by the Farmers State Bank,
i°17a; the Federal Reserve Agent inquiring whether the bank's six
raonthet notice may
begin as of April 18th, on which date he was verbally
8 :v 1.8
of the intention of the bank to withdraw from the System.
The Vice Governor stated that in the opinion
of the Board's Counsel, the six months' period
can only begin as of the date of the filing of
written notice with the Federal Reserve Agent,
and upon motion the Secretary was instructed to
advise the Federal Reserve Agent accordingly.
14atter approved on initials on April 30th, namely, memorandum dated

Apri,

30th from the Chief of the Division of Bank Operations, suggesting
that the
Board authorize an earlier release of its weekly statement of the

"kit.

of member banks during the period in which daylight savings




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-7-

erl'arigements are in effect.
Formally approved.
Letter dated April 25th from the Governor of the Federal Reserve Bank
o

lanneapolis, referring to an inquiry from a member bank in that city

"(I inquiring as to the reasons for the Board's recent ruling with reference
to the
e4gibility of bankers acceptances secured by terminal grain elevator
Or 17grehouse

receipts issued by the borrower.
After discussion, the above letter was referred to the Secretary for the preparation of a
reply stating that in the opinion of the Board
the principle laid down in its Regulations requiring that warehouse receipts to be eligible as collateral for acceptances must be issued by a warehouse independent of the customer, to which the
Board has consistently adhered, is essential to
the maintenance of the high standard of bankers
acceptances, and that any action by the Board setting
aside this principle would in all probability establish a precedent for future action which would result
in the lowering of such standard.

lIellicrandum from Counsel dated March 24th, prepared in accordance with
the
tor

illatructions
- of the Board at the meeting on March 4th, and submitting

the confidential information of the members of the Board an analys is

Ot the provisions of the McFadden Act.
Ordered circulated.
Letter dated
April 29th from the Governor of the Federal Reserve Bank
"ilich111°/1d, who is Chairman of the lidvisory Committee appointed by the
h4rd 8°111e time ago to calsider legislative matters; the Governor inquiring

11
-

Ilhether the Board has anything for the cons ide rati on of the Committee which
reqUire a meeting at the tine of the forthcoming Governors I Conference
Whert five
of the six members of the Committee will be in Washington.




364

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-8-

In this connection, the Vice Governor submitted
a memorandum addressed to Mr. Hamlin under date of
February 3rd by the Board's General Counsel listing
various proposed amendments to the banking laws which
the Board has recommended to Congress or planned to
recommend, but on which further action was postponed
until the McFadden Bill could be disposed of.
He suggested that the various amendments covered
in Counsel's memorandum might be referred to the
Committee.
At this point, Mr. McIntosh joined the meeting.
Following the discussion, Mr. Hamlin moved that
the Committee be requested to submit to the Board
any suggestions or recommendations which it may care
to make for amendments to the Federal Reserve Act.
Mr. Hamlin's motion being put by the
Chair was lost on a tie, the members voting
as follows:
Mt. Platt, "aye"
Mr. Hamlin, "aye"
Mr. James, "aye"
Mt. McIntosh, "no"
Mr.• Miller, "no"
Mr. Cunningham, "no"
The Secretary was then instructed to advise the
Chairman of the Committee that the Board has no matters
to submit to the Committee at this time.
The Vice Governor then submitted memoranda from Counsel dated March
3C:th
'1926, and May 22nd, 1926, on the subject of the necessity for the
Ciell"it

of securities in the trust department of a national bank to secure

f
-1-Inds deposited in another institution; Counsel in his last memo-

L

1.41.4
1141 suggesting an amendment to the Board's Regulation F providing that
irr
;
i nds received or held in the trust department of a national bank awaitInvestment or distribution are deposited in another bank, they shall
be d
ePosited to the credit of the said national bank as trustee or other
ridu .
elarY, and the said national bank shall first require the bank in




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-9-

the funds are deposited to deliver to the said rational bank colktmral security awned by the depositary bank which shall at all times be
8Ita1

in market value to the amount of funds so deposited. The Vice

Governor stated that Counsel's memoranda
has for some time past been under
e°nsidemtion in the office of the Comptroller of the Currency and
he preaerlted a

memorandum from the Comptroller dated April 29th suggesting that

the natter

be held in abeyance, as he does not regard the question raised

48 (pe any considerable technical importance and would prefer to see no
Iteticon taken on it at this time as it would merely be another restriction
°n nat ional banks to their disadvantage in competing with state banks .
A discussion ensued following which it was
voted that no action should be taken by the Board
at this time.
Letter dated April 27th from the Federal Reserve Agent at San
?taneisco, referring to a recent examination of the Pacific Soutivest
l'1141ti and Savings Bank of Los Angeles conducted by the State Banking
beh.
4-rtment and transmitting copies of certain documents and correspondence

'4el°sing a transaction involving several of the officers and employees
°e the bank
in connection with the financing of a merger of the Julian
ot
-"'°um Corporation and IJarine Corporation with the Eastern Oil Company,
the Agent reported, was carried on without the knowledge of the
Calm—
or President of the bank until subordinate officers had committed

the i
--ri titution to such an extent that it became necessary to finance the
tiee.i _
'° a conclusion in order to save the bank from a very heavy loss.
Ordered circulated.
The Secretary then advised the Board of an inquiry received from Mr.
eEt''getit, local representative of the Wall Street Journal, as to the extent



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-10-

Cost of any telegraph wires or cables leased by the Federal Reserve
He inquired whether the Board could see any objection to his furnialling a sketch of the Federal Reserve Leased Wire System together with
ille°1111ation as to the aggregate cost of the System to the Federal Reserve
134114 and Board.
After discussion, the Secretary was authorized
to furnish the data referred to by him.
11E1'°11T'' 0-1 S

NDI1TG C0idM1T TEES:

11) *ted,

April 27th,
28th,
29th,
30th,
ilty 2nd,
1) ted, April 26th,
28th,

1)stted,

te.ted,

bEtted"

be.ted,

Recommending changes in stock at Federal Reserve Banks,
as set forth in the Auxiliary Minute Book of this date.
Recommendations approved.

Recammending action on applications for fiduciary
peraers as set forth in the Auxiliary Minute Book of
this date.
Recommendations approved.
pr ii .29th, Recommending approval of the application of Mr. William
D. Schramm for permission to serve at the same time as
director of the Eighth National Bank, Philadelphia, Pa.,
and as director of the Central Trust and Savings
Company, Philadelphia, Pa.
Recommendation approved.
April 29th, Recommending approval of the application of Mr. E. S.
Jones for permission to serve at the same time as Vice
President of the Marquette National Bank, Minneapolis,
Minn., and as director and Vice President of the
Chicago-Lake State Bank, Minneapolis, Minn.
Recomendation approved.
April 29th, Recommending approval of the applicat ion of Mr. John
F. Tinsley for permission to serve at the same time
as director of the Second National Bank, Boston, Mass.,
and as director of the Merchants National Bank,
Uorcester, ]:ass.
Recommendation approved.
1tpril 29th, Recommending approval of the application of Mr. A. P.
Hull for permission to serve at the same time as
director of the Farmers & Citizens National Bank,
Montgomery, Pa., and as director of the Lycoming
Trust Company, Williamsport, Pa.
Recommendation approved.




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-11-

OP STILNDING COI: TITTIPZS:

(Cont i d)

Dated, April 30th,

Reco.amending approval of the application of Mir. F. M.
Moseley for permission to serve at the same time as
director of the American National Bank, Pensacola,
Fla., and as Present and direct or of the American
National Bank, Union Springs, Ala.
Re commendat ion approved.
Dated, April 30th, Recommending approw.1 of the application of Mr. Walter
J. Staats for permission to serve at the same time as
director of the First National Bank, Philadelphia, Pa.,
as director of the 'Jest Jersey Trust Company, Camden,
J., and as director of the First Nat ional flank and
Trust Company, Merchantville, N. J.
Recommendation approved.
°ated, April 30th, Recommending approval of the application of Mr. G. II.
Malone for permission to serve at the same time as
director of the American National Bank, Pensacola, Fla.,
as president and director of the First National Bank,
Dothan, Ala., and as President and director of the
First National Bank, Headland, Ala.
Recolamendat ion approved.
Dated,
April 30th, Recora:aending approval of the application of Mr. VI. C.
Sherman for permission to serve at the same time as
director of the /uaerican National Bank., Pensacola, Fla.,
and as Vice President and direct cr of the First National
Bank, Panama City, Fla.
Ilecommendo.t ion approved.
Dat ed,
April 30th, Recommending, approval of the application of Mr. Charles
i. Faircloth for permission to serve at the sane time as
President and director of the National City Bank, Tampa,
Fla., and as director of the American National Bank,
Pensacola, Fla.
Recommendation approved.
bated,
April 30th, Recommending approval of the application of Mr. Edvrard
E. Frown for permission to serve at the same time as
direct or and officer of the First National Bank, Chicago,
Ill., as director and officer of the First Trust Joint
- director and offiStock Land bank, Chicago, Ill., an
cer of the First Trust Joint Stoc
nd. Bank, Dallas, Tex.
Recomenda.tion approved.
The meeting adjourned at 12:

• •

APPreved:
Secretary
417-16c
/?ir
Vice Governor